Vital Signs - The Analyst's Perspective - January 2015 Issue

Vital Signs - The Analyst's Perspective - January 2015 Issue Roche announced its intention to acquire majority of stakes from Foundation Medicine Inc. (FMI) (about 56.3%). Roche will tender approximately 15.6 million Foundation Medicine shares at USD 50 per share with an aggregate tender value of $780 million. With this, Roche also announced its plans to invest about $250 million in Foundation Medicine. The initiative is focused on enhancing FMI’s new product development pipeline and improvises on commercial collaborative agreements aimed at expanding geographical markets. The transaction is expected to close in Q2 2015.

The Analyst’s Perspective by Divyaa Ravishankar, Senior Industry Analyst, Life Sciences, North America

Strengths of Foundation Medicine: FMI’s access to rich molecular information provides Roche’s oncology programs a great advantage to advance their pipeline drugs and diagnostics. Cancer panels launched by FMI provided them with the first-mover advantage within the high-growth molecular diagnostics market. Currently, there is no direct competitor to FMI, which clearly gives it an advantage to pitch the solution to physicians and create a loyal customer base. Ever since FMI launched the FoundationOne test in 2012, more than 3,000 physicians offered to buy the test globally in over 30 countries. The key challenge that exists today with NGS data is the lack of understanding and the need to compile a clinically actionable report. This is something only FMI has been able to establish in this space. The data from Cancer Outcomes Tracking and Analysis (COTA) (a group of 100-plus oncologist practices) helps FMI analyze genomic data, cost data and clinical outcomes from patients that use FMI’s test. These results can be easily applied to existing clinical trial programs that involve Roche.

Benefits of this Partnership: This partnership is clearly directed at the future of personalized medicine that aims to develop several companion diagnostic tests. Given Roche’s success in personalized medicine and Foundation Medicine’s technology program that is rich in clinical trial support data, this strategic partnership is aimed at accelerating the shift to molecular medicine within multiple disease areas. Roche aims to use FMI’s molecular information platform for all its pipeline programs and form new product areas for cancer immunotherapy and companion diagnostics. FMI’s previous partnerships with pharma companies and engagements with the FDA have truly created a positive impact for this partnership. Its existing partnerships with WuXi, EmergingMed and COT A are well aimed at future adoption.

FMI can leverage support from Roche’s long-standing member, Genentech, and its long history of expertise in pharma and diagnostics. FMIs technology will also help Roche complement its biomarker development programs, speeding the process for targeted therapeutics. As a result, FMI’s tests will be eventually integrated into Roche’s existing clinical trials. Roche has very strong commercialization strategies through the use of medical education; this can be very helpful for FMI.

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